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Economic growth: A recruiter's friend or foe? An interview with David Thornhill

Simplicity MD David Thornhill recently spoke to Recruitment Buzz about the increasing confidence in the market. Here's their write up...

“Economic growth”, “increasing employment levels”, “recovery”… According to the latest newspaper headlines, the end of the recession is nigh and if we are to look at the facts, it seems for once that those plucky journalists are not exaggerating. The Office for National Statistics said the third quarter of 2013 “marked the strongest period of growth in more than three years - with services, construction and manufacturing all expanding” and in-turn, helping the UK economy grow to 0.8%.

It may not seem to be a great figure but the economy is slowly, but surely making a recovery and unemployment levels have definitely fallen. With over 41,000 people back in work during September, 29 million people are now in employment and confidence is finally starting to return to the market.

At Recruitment Buzz, we wanted to find out how the recruitment industry will fair in such a changing economic climate and decided to sit down with David Thornhill. As Managing Director of Simplicity, an award winning international provider of outsourced back office and financial solutions to the recruitment industry, he’s well placed to answer questions about how an economic recovery will impact on those working in the very nucleus of the jobs market.

Throughout the recession, the Simplicity team has offered vital financial solutions to recruitment businesses across the country, especially those experiencing difficulties. The financial experts specialise in services ranging from funding to outsourced back office and interestingly, since the beginning of April this year, the company has grown by 25% with 15% of this expansion coming from recruitment agencies start-ups.

It seems that small, niche recruitment agencies are beginning to pop up, pre-empting the fact that with economic growth, companies will need to meet new demand. The recruitment industry is first in line to meet the necessity for more workers in the form of contractors, temps and permanent staff.

David says, “Unlike most European countries, the UK recognises the need for a temporary and flexible work force… with an increase in work, recruiters will be tasked with a huge search for workers.”

Good news for recruiters then - but with more work becoming available due to the economic growth, will the recruitment industry be able to keep up? David believes that any underprepared recruitment business will take a hit - especially in the temporary market. He says, “There is currently around a 25% churn in the temporary market. This means that each recruitment company will have a quarter of new starters each week.”

Although demand for new workers may not be so bad when the request is 5 to 10 workers, it is when companies need greater numbers of workers that it becomes difficult. Recruiters may not be able to cope with the high demands, especially if they find themselves having to to churn out new workers every week to replace the ones that do not return.

To exacerbate the problem, demand on resources and finances could also mean failure for many agencies and that’s where Simplicity can help. David says, “With Simplicity helping with finance, struggling agencies have a much higher success rate compared to their competition.”

It certainly seems that now is the time for the recruitment industry to get ready for a surge in demand. But David mentions that had European and UK’s Governments supported businesses throughout the recession, the situation could be much different. He says, “SME’s are the life blood of this country, and to the recovery of it too. I feel we could have got here earlier if there wasn’t so much legislation change in our industry - MSC legislation / AWR / RTI. Pensions / vat on margin…”

Recruiters have had to work incredibly hard to keep their businesses afloat through difficult times, some even changing markets to gain business - learning along the way. But David says that with increasing confidence, they must be careful not to rest on their laurels. He says, “They must continue to be astute through these early days if they are to survive.”

According to David, one major downfall which he sees in many agencies is a lack of understanding around margins. He states, “The success of a recruitment agency is in question if they get margins wrong… the lower the margin, the less likely they are to succeed.” That’s the primary reason for Simplicity’s Margin Calculator - an easy to use, simple tool which could make all the difference.

As well as utilising solutions such as this, there are a few critical steps that recruitment agency owners need to take in order to prepare their business for growth. David says, “I see building a business like building a house. Having the right foundations in place is imperative, otherwise it can all come crashing down around you!”

He goes on, “Making sure you have the right staff and a suitable working environment is highly important. You don’t want workers that can’t meet the demands nor an office that is inappropriate to work in. A great IT system and a CRM in place along with a back-up system will be priceless if a disaster strikes.”

In addition to this, knowing the market and researching the right umbrella company for you will increase your cash flow and margins down the line. Of course, the most important factor in keeping a business afloat is securing finance. David recommends, “Make sure you have the right funder. As well as this, incorporating back office takes away the pressure from doing it yourself, allowing you to concentrate on the success of your business.”

With over 40 years’ experience between them, each member of the Simplicity Management Team certainly knows what they are talking about and you can use their expertise in recruitment to help your businesses grow and reach its full potential. The time for growth is now and the changing economy can certainly be your friend - so long as you ensure you are ready.